Meme is changing investment logic: Why does Dogecoin, once regarded as a joke, have value?

This article is from Mars Finance, authored by Blocklike Editorial Team, with the original title "Community Coin Representative DOGE: Meme is Influencing Investment Logic | Witness".

More cryptocurrency enthusiasts are looking at Dogecoin from a new perspective.

The Dogecoin community has always been joyful. On March 2, Elon Musk's new tweet once again pointed to the popular coin Dogecoin. In the image, the "Meme" acts as a shield protecting Dogecoin.

Since the end of January, Dogecoin's price has experienced dramatic fluctuations. Just like previous historical surges, on January 29, Dogecoin's intraday increase reached 800%. In the following days, DOGE's market capitalization even briefly surpassed LTC. CoinMetrics data suggests that the buyers driving this surge were almost entirely from the American stock trading platform Robinhood, known as the "retail investor's stronghold."

Regarding Dogecoin, Musk's tweets have been constant, sparking a massive following. In the crypto community, this "Shiba Inu" image has ignited creative enthusiasm, with memes, videos, and GIFs spreading rapidly.

Regardless, this cryptocurrency, which carries the Meme concept, has attracted a wave of followers.

Last week, the American financial blog portal ZeroHedge stated in a tweet that there are reports that the U.S. Securities and Exchange Commission (SEC) will investigate Tesla CEO Musk regarding tweets about Dogecoin. Musk calmly responded, "I hope they do, that would be awesome."

Since the SEC's classification of DOGE remains ambiguous, and Dogecoin has long been "returned to the community," this may leave the SEC at a loss when it comes to investigating market manipulation of DOGE.

When the SEC's investigation will arrive remains unknown, but the Dogecoin community has already taken action, with many supporters accelerating the exploration of new opportunities for "community coins."

"Everyone is a Volunteer"

In the face of a surge of attention at the end of last year, the Dogecoin community has recently been very active.

On one hand, the "Dogecoin community" has become a broad community. Since the founding team announced its dissolution, the development of the Dogecoin mainnet from 2014 to 2019 has been almost entirely driven by the community, making it a typical project "pushed forward" by the community. Amid this wave of enthusiasm, more people have voluntarily joined the Dogecoin community and are developing or innovating based on it.

On the other hand, Dogecoin developers have released a new version, Dogecoin Core 1.14.3. The new version improves node synchronization speed and reduces the default memory pool expiration time. Each time a block is sent to another node, an expensive integrity check needs to be performed; this update has removed that execution, thereby improving the speed at which DOGE nodes upload blocks.

Peng Song, the former founder of the Dogecoin China community, stated that volunteers for Dogecoin are currently advancing more initiatives, including DEX, cross-chain trading, and transaction fee buybacks for DOGE, among others.

On February 20, in a ClubHouse live stream, Baoyi Ye announced plans to raise 100 million for a Dogecoin fund aimed at the development and governance of the Dogecoin community.

More cryptocurrency enthusiasts are looking at Dogecoin from a new perspective. Institutions are doing the same.

On March 1, Bitcoin ATM operator CoinFlip announced support for DOGE. Subsequently, U.S. residents will be able to purchase Dogecoin at ATMs in 45 states. CoinFlip's CEO stated that the reason is due to the recent widespread adoption of the token.

There are many reasons for the interest in Dogecoin: some hope to profit from holding Dogecoin, some are drawn in by Musk's repeated mentions, and some simply find it amusing. Looking back at the data since early March, Dogecoin's increase has reached 1352.88%.

Meme Coins are Evolving

Dogecoin has never lacked stories.

The concept of "Meme" was proposed by Dawkins, the author of "The Selfish Gene," referring to ideas in culture that can be spread, replicated, and reproduced, echoing the concept of "genes." Memes also carry the responsibility of "replication and propagation."

Memes are widely present in various cultures, and Dogecoin is undoubtedly recognized as a "MemeCoin" in the crypto community. The official definition of Dogecoin is "a fun and friendly internet currency," with a total supply of 100 billion coins and an annual increase of 5%, which keeps Dogecoin's value relatively low. The longevity of Dogecoin is closely related to community dissemination.

Dogecoin was born in December 2013, based on the Scrypt algorithm, with the "Shiba Inu" emoji and image deeply ingrained in people's minds. On the community forum Reddit, Dogecoin has over 100,000 fans, already squeezing into the "100,000 Fans Club" that includes Bitcoin, Ethereum, Litecoin, and others. On Twitter, Dogecoin has 630,000 fans.

Some community perspectives suggest that Dogecoin was once treated as a joke, overlooking the fact that it is precisely this "joke" that has given Dogecoin its interesting, optimistic, and inclusive "core."

In the past month, most mainstream media both domestically and internationally have attributed Dogecoin's surge to Musk and a number of entertainment industry stars' endorsements. Due to the enormous social influence of these individuals, Dogecoin's price has experienced significant fluctuations; for example, a comic depicting "Dogecoin going to the moon" can cause the coin's price to surge by 10%, and when Musk changed his Twitter bio to "Doge all day, Doge all night," Dogecoin responded with a rise of over 21% within 24 hours.

This has been seen by the community as the next phase of Robinhood's "retail investor movement."

Retail investors in U.S. stocks choosing Dogecoin is not without precedent. Information about this coin spreads virally within the community.

Previously, in July 2020, Dogecoin also experienced a price surge driven by individual investors, triggered merely by a TikTok user named James Galante posting a short video titled "Let's All Get Rich." This video went viral on social media, attracting a lot of attention and pushing Dogecoin's price up by 20% within 24 hours.

On the other hand, Dogecoin remains controversial due to its centralized distribution. According to BitInfoChart data, there are mysterious whale addresses hoarding large amounts of Dogecoin, with the top 10 addresses holding a total of 41% of the coins, and some whales holding nearly 30% of the circulating total. This makes Dogecoin's price susceptible to manipulation. Critics argue that the recent surge in Dogecoin is entirely due to speculative behavior rather than fundamental value.

In the past, since most participants in trading were individual retail investors, Dogecoin was used as a barometer for measuring sentiment in the crypto market.

Now, Dogecoin is viewed as the core Meme of the community, and the demands of individual investors have extended into the blockchain industry, changing the investment logic of community attribute coins.

This "community" attribute seems more like a vague concept.

However, one of Dogecoin's founders, Billy Markus, has described this concept more clearly. A few days ago, Billy Markus wrote a letter to all Dogecoin enthusiasts on Reddit, explaining: The true value of Dogecoin is not in pumping or dumping, but in the "positive energy" it brings to the world. Joy, kindness, learning, giving, empathy, fun, community, inspiration, creativity, and generosity are the factors that make him feel Dogecoin is worth existing. If the community embodies these things, then that is true value.

Decentralized Finance is Changing Investment Perspectives

Some believe that the phenomenon of Dogecoin's popularity has also revealed a shift in investment paradigms in the new DeFi landscape.

In traditional industries and the internet sector, investment institutions, funds, or individuals can invest in a company's equity or stocks, where the rights represented by equity or stocks are clear, such as stock dividends, discounted cash flows, and participation in company decisions. However, in the DeFi and blockchain industry, the investment object is Tokens, and with the innovation of decentralized finance, more data has emerged, including token holdings, trading volumes, transfer amounts and frequencies, the number of Dapps, and transaction volumes.

The blockchain industry is highly innovative, and the data dimensions for project valuation are still immature; practitioners are still exploring how to establish a reasonable valuation theoretical system.

Today, the internal and external factors of the new market cycle have changed significantly from the past. From a macro perspective, it still faces the ongoing impacts of the global pandemic and the economic impacts of various countries with declining expectations. Whether it is the relative valuation method, discounted cash flow method, or PE or VC investment theories in traditional fields, deviations have appeared in the investment of innovative blockchain projects.

Coindesk journalist Emily Parker recently wrote that Dogecoin is an emotion-driven asset. However, recently, such examples are everywhere, with value created by collective emotions and growing under the incitement of social media. The most obvious example is GameStop, where Reddit users banded together to drive up the price of this heavily shorted stock. A recent example is Mars Coin, which surged over 1000% after Elon Musk mentioned it on Twitter.

Collective belief is at the core of the crypto community. From this perspective, some collective beliefs may even surpass "fundamentals," and some changes have already arrived.